Wise Ass

Robert Verzi: ‘I agree with Dick Davis about index funds and I feel that index funds have run their course for a while. The problem I have with them is that they are severely burdened with over-priced growth stocks. I think the Wilshire 5000 has a PE ratio of over 30. I think that is too expensive for my tastes. I think there is still a bubble to be burst. I hate to buy more index funds that I feel are too expensive.’

☞ But that just means the whole market is overvalued – including, therefore, most of the holdings of the actively managed mutual funds as well. But they have the heavier jockeys, and so will do even more poorly than the index funds, if you’re right.

So . . . if you are right, you either try to pick undervalued stocks, here or abroad, yourself – which is tough. Or you stick with a few funds that specifically aim for ‘value’ situations – but really great values are not so easy for them to find, either. Or you sit on the sidelines (in TIPS? in money market funds?) for a while longer, hoping that through luck or good judgment, this proves to be one time that you can successfully time the market.

Net net: if you’re young or youngish, and have been steadily investing your long-term money in stocks via broad index funds, I would just keep on doing it, even though I think we have some tough years to get through.

And now . . .

WISE ASS

Patrick asks, ‘Have you seen this one?’

One day a farmer’s donkey fell into a well. The animal cried piteously for hours as the farmer tried to figure out what to do. Finally he decided the animal was old and the well needed to be covered up anyway. It just wasn’t worth it to retrieve the donkey. He invited all his neighbors to come over and help him. They all grabbed a shovel and began to shovel dirt into the well. At first, the donkey realized what was happening and cried horribly. Then, to everyone’s amazement, he quieted down. A few shovel loads later, the farmer finally looked down the well and was astonished at what he saw.

With every shovel of dirt that hit his back, the donkey was doing something amazing. He would shake it off and take a step up. As the farmer’s neighbors continued to shovel dirt on top of the animal, he would shake it off and take a step up. Pretty soon, everyone was amazed as the donkey stepped up over the edge of the well and trotted off!

Life is going to shovel dirt on you, all kinds of dirt. The trick to getting out of the well is to shake it off and take a step up. Each of our troubles is a stepping stone. We can get out of the deepest wells just by not stopping, never giving up. Shake it off and take a step up. Remember the five simple rules to be happy: 1. Free your heart from hatred. 2. Free your mind from worries. 3. Live simply. 4. Give more. 5. Expect less.